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ECJ rules on use of frozen funds for legal expenses

The European Court of Justice (the “ECJ”) has handed down judgment in Case C-314/13 Uzsieno reikalu ministerija & Ors v Vladimir Peftiev & Ors. in which, among other things, it ruled that national authorities did not have limited discretion when deciding whether to release frozen funds for legal expenses. The genesis for this ruling was as follows: a law firm which had been asked to represent Vladimir Peftiev, whose assets are frozen by virtue of being a designated person under EU sanctions relating to Belarus, applied to the Lithuanian national authority for an exception to the asset freeze so that Peftiev could pay legal fees from funds that would otherwise be frozen. The Lithuanian national authority refused. Consequently, the law firm referred a set of questions to the ECJ, including whether national authorities enjoy absolute discretion when deciding whether to grant an exception under EU sanctions legislation.

The ECJ ruled that, in assessing whether to grant an exception, a national authority lacked absolute discretion but had to decide in such a way as to uphold the rights enshrined in the Charter of Fundamental Rights of the European Union, Article 47 of which guarantees access to justice. However, the ECJ also ruled that national authorities were permitted to set conditions to the granting of a licence in order to ensure that the funds freed up were used “exclusively for payment of reasonable professional fees and reimbursement of incurred expenses associated with the provision of legal services”. Such conditions, the ECJ stated, could include giving preference to bank transfers over cash payments.